George v. Connecticut Fire Ins. Co.

A very elaborate brief has been filed in support of the second petition for rehearing, and a proper consideration of the same necessitates not only a consideration of the opinion in this case, but also a consideration of the opinion on the former appeal, being Connecticut Fire Ins. Co. v. George,52 Okla. 432, 153 P. 116. We think the former opinion failed to consider several material questions that should have been considered and were raised by the brief in said case, and are necessary to be considered at this time in reaching the right conclusion upon this second petition for rehearing.

The policy involved was for insurance in the total amount of $2,000 and divided as follows:

(1) $200 on household and kitchen furniture, etc., "while contained in above-described dwelling house;" (2) $150 on iron and board roof frame barn No. 1, with shed attached, including foundation; (3) $250 upon grain, corn, ground feed, and seed while in building or in stacks on farm: (4) $100 on farming utensils, wagons, harness, saddles, etc., while in building on farm; (5) $350 on hay, straw, fodder, and flax while in building or in stacks on farm; (6) $800 on horses, mules, and colts anywhere; (7) $150 on cattle anywhere. This action was brought to recover loss of: (1) Household furniture; (2) grain; (3) certain farming utensils; (4) hay.

In the former appeal this court treated the policy as an inseparable contract and that a violation or breach of the conditions of the policy, in so far as it related to one class of property, would render the entire policy void. In this we think the court committed error and overlooked the former decision of the territorial Supreme Court, to wit, Miller v. Delaware Ins. Co. of Philadelphia, 14 Okla. 81, 75 P. 1121, wherein the court stated as follows:

"Where an insurance policy is issued, and different classes of property are insured, each class being separated from the others, and insured for a specific amount, and there is a breach of the conditions of the contract as to one class of the property insured, the contract should be considered not as one entire in itself, but as one which is severable, and in which the separate amounts specified may be distinguished, and a recovery had for one or more of them without regard to the other, provided the contract is not affected by any question of fraud, act condemned by public policy, or any increase of the risk of the company on the whole property insured because of the breach."

The identical question was before the Supreme Court of West Virginia in the case of Bond v. National Fire Ins. Co. of Hartford, Conn., 97 S.E. 692, and the court said:

"A fire insurance policy covering different classes of property, separately valued, containing a condition or warranty relating to one class of property only, and not affecting the risk as to another, is a divisible contract, and is not avoided in its entirety because of a breach of such condition or warranty, notwithstanding a stipulation in the policy that it shall become void in toto upon a breach by the insured of any one of its conditions."

In the body of the opinion the court stated as follows!

"Whether in such case the policy is divisible or entire, there is much conflict in the authorities. There are three distinct rules relating to the question, each finding support in the decisions of the various courts of this country. One rule is that if the premium is paid in gross, even though the property insured is separately valued, the contract is entire; another that if the property is separately valued the policy is divisible even though the premium is in gross; and still another rule is, where the property is separately valued the divisibility of the policy depends upon whether the property is so situated that the risk on one item of it affects the risk on the others. If a provision or warranty in a policy relating specially to one item of property separately valued affects the risk of all, the policy is regarded as entire, whether the premium is separate or in gross; but, if it does not so affect the risk on all the property insured, the policy is divisible."

The Supreme Court of Michigan, in the case of Benham v. Farmers' Mutual Fire Ins. Co., 131 N.W. 87, L. R. A. 1915D, 736, stated as follows:

"A policy insuring for a single premium specified sums on the dwellings on a farm and its barns, sheds, furniture, products, equipment on the premises, and livestock anywhere in certain specified counties, is divisible, and the insurance on the personalty is not avoided by breach of warranty as to condition of chimneys on the dwellings and the placing of an incumbrance on the realty without authority, except so far as it is contained in the buildings as to which the risk is increased."

The cases supporting the rule above announced are annotated in 2 Am. Eng. Ann. Cas. 22; in the note the annotator stated as follows:

"When these rules have come to be applied to a contract for insurance on different pieces of property, there has been contrariety of opinion. It seems to be conceded in general terms that, where the contract is entire, a breach of conditions affects all the property at risk, but as to what makes an entire contract there is not uniformity of ideas. It is doubtless a sound rule that where by a policy upon several separate and distinct classes or species of property, each of which is separately valued, the sum total of the valuation is insured on payment of a premium in gross, the contract is severable; and a breach of a condition avoiding the policy as to one of the items does not affect it as to the others if there is nothing in the terms, in the nature of the contract or of the different subjects of the insurance, or in the surrounding circumstances, from which it can be inferred that the insurer would not have been likely to have assumed the risk on one or several of the subjects of the insurance, unless induced by the profit or advantage of having a risk upon all, and if the breach as to one item of property does not increase the risk as to the balance."

The annotator, in support of this rule, states as follows:

"In Merrill v. Agricultural Ins. Co., 73 N.Y. 452, holding that a breach of a condition in a policy of insurance by placing incumbrances on buildings did not avoid the policy as to chattels in the buildings which were separately valued, the court in its reasoning points out the considerations which are determinative as to the divisibility of insurance contracts. 'There is nothing to show that an Incumbrance upon the buildings would have been an objection to a risk on the chattel property, or that the opportunity of insuring on the buildings was the inducement to taking a risk also on the chattels. There is nothing in the nature or terms of the contract which make it so much an entirety as that it is at all difficult to tell the amount insured on the buildings, as distinguished from that at risk upon the chattels. There is nothing to show that had the chattels been insured, without insuring the buildings, the premium would have been greater or different. The risks are not necessarily indivisible; they may be dealt with in separate clauses, and are made up of distinct and independent sums on different and distinct properties. There may be reasons which, existing as to one class of the property insured, might deter an insurance company from taking a risk on any of the classes. Some such general cause, as fraud in the insured as to one class, would in its nature extend to the whole subject-matter of the contract, and vitiate and avoid the whole contract in all its parts. But it is difficult to conceive how an act, in itself not evil, though it may affect one of the classes of property insured, and so affect it as to increase the hazard, if it does not also increase the hazard on another class, should operate so as to impair the contract as to that latter class.' In Baldwin v. Hartford F. Ins. Co., 60 N.H. 422, it is held that an alienation by the insured, without notice, of one of several parcels of real estate covered by a fire policy containing a stipulation against alienation, avoids the policy as to property not alienated, unless the court can say as a matter of law that the risk of the remaining property is not increased."

As stated in the case of Bond v. National Insurance Co., supra, the different courts are in conflict as to whether the policy is a divisible contract or an inseparable contract. One line of decisions adheres to the rule that if the premium is paid in gross, even though the property insured is separately valued the contract is entire. Another line adheres to the rule that if the property is separately valued, the policy is divisible, even though the premium is paid in gross. The other rule is the rule announced in the case of Miller v. Delaware Ins. Co., supra, to wit: Where the property is separately valued, the divisibility of the policy depends upon whether the property is so situated that the risk on one item affects the risk on the others, and if the items of property separately valued affect the risk on all the property, it is regarded as an entire contract, and if it does not so affect the risk on all the property, the policy is divisible.

The risk upon the horses, cattle, or upon the grain or farm implements would not affect the risk upon the household furniture. We think the court committed error in holding, which it necessarily did, that the policy was an inseparable contract.

We will next consider the correctness of the former opinion in so far as it ordered the case dismissed. In considering this question there are two provisions of the policy necessary for consideration. The first provision is:

"The assured shall also produce all that remains of the property hereby insured, whether damaged or not, and exhibit the same for examination and submit to examination under oath and subscribe to same to any person named by the company."

The other provision:

"No suit or action on this policy, for the recovery of any claim, shall be sustainable in any court of law or equity until after full compliance by the assured with all the foregoing requirements, nor unless commenced within twelve months next after the loss occurred."

The courts are unanimous in holding that the provision in the policy requiring the insured to submit to an examination under oath is a binding and valid provision. The courts are likewise unanimous in the decisions in holding that when the insured submits to an examination, he is only required to answer material questions, and the failure to answer immaterial questions will not avoid the policy. Insurance Co. v. Weide, 81 (14 Wall.) U.S. 375; Porter v. Traders Ins. Co. of Chicago (N. Y.) 58 N.E. 641; Titus v. Glens Falls Ins. Co., 81 N.Y. 410.

In the instant case the insured submitted to an examination, but refused to answer certain questions. This court in the former opinion held the questions were material, and we think correctly so, in so far as the questions related to the insurance on the grain, wagons, harness, and saddle. The mortgages did not cover the household furniture, and the questions were not material in so far as they related to the insurance on household furniture. The questions which related to the insurance upon the cattle and horses were immaterial for the reason that portion of the policy was not before the court, and there was no attempt to collect for any loss on this claim or species of property.

The question for consideration is: Where a policy contains a provision requiring the insured to submit to an examination under oath, and contains a further provision that no suit shall be sustainable until the insured has complied with the terms of the policy, will the failure to answer material questions forfeit the policy? The general rule of law is that forfeitures are not looked upon with favor by the courts. The policy does not provide that a failure to answer a material question shall forfeit the policy, but provides no suit shall be sustainable until the provisions of the policy are complied with. The word "sustain" may be susceptible of several constructions. Webster defines "sustain" to mean to "carry on", or to "maintain", and that is the general meaning of the term.

The policy itself is silent as to when this examination shall be held. It might be requested before suit was filed; it likewise may be requested after the filing of suit. It has been held, and we think correctly, in this kind of a policy that the personal examination of the insured is no part of the proof of loss provided for by the policy, but it is a right that is reserved to the company, which it can exercise as it may choose. Such was the holding of the Supreme Court of Illinois in the case of Winnesheik Ins. Co. v. Regina Schueler, 60 Ill. 465, where the court stated as follows:

"The personal examination of the assured, reserved to the company by the conditions of the policy, formed no part of the proof of loss provided by the policy, and it did not matter that such an examination was made more than 30 days after the loss occurred. The right to so examine was a privilege reserved to the company, which they could exercise or not, as they might choose, but was not a duty imposed on the assured."

We think the correct rule under policies which contain provisions similar to the one in controversy, where a difference arises over whether certain questions are material or immaterial, was announced by Judge Dillon in the case of Weide v. Germania Insurance Co., 1 Dillon's Reports, 441, where the court in the first syllabus paragraph stated as follows:

"Under certain provisions of a fire insurance policy, the refusal of the assured to submit to an examination on oath or to answer material questions respecting the loss, was considered not to work a forfeiture of the policy, but only to cause the loss not to be payable until this was done; and such refusal should be pleaded in abatement, and separately from defenses in bar."

The same view was taken by the Court of Appeals in New York in the case of Porter v. Traders' Ins. Co., 164 N.Y. 504,58 N.E. 641, 52 L. R. A. 424; in that case the court stated as follows:

"The provision of the contract as to which a breach is alleged is the agreement of the insured to 'submit to examinations under oath by the person named by this company.' They did submit to examination. It cannot be claimed that they were bound to answer every question propounded, however irrelvant. They were bound to answer only such as were material, having in view the purpose of the condition. They had no guide as to what was or was not material, except their own judgment, acting, of course, in good faith. Even if they made a mistake in deciding that the inquiry with respect to the cost of the steamer was not material, it is no ground for visiting them with a forfeiture of all the benefits of the contract, and the principle above suggested should apply.

"Finally, it should be noted that the condition alleged to have been violated in this case applied only after the capital fact of a loss. The object of the provision was to prescribe the manner in which an accrued loss was to be adjusted and ascertained. The liability of the defendant having become fixed by the happening of the event upon which the contract was to mature, conditions for ascertaining the extent of it, or for adjusting it, are not to be subjected to any narrow or technical construction, but construed liberally in favor of the insured."

The Supreme Court of Washington, in commenting upon the provision in the policy which provides that no action should be sustainable until the terms of the policy 'had been complied with, in the case of Barbour v. St. Paul Fire Marine Ins. Co., 171 P. 1030, stated as follows:

"But, even if this were not so, when we look to the words of the policy, which it is well settled must be strictly construed against the insurance company, we do not find that it provides that no action shall be 'commenced,' but that no action shall be 'sustainable.' At the time plaintiffs sought to sustain their action by proofs, the examination had been signed and was in the hands of the defendant. All that the policy required had been performed."

The Supreme Court of Texas, in the case of Humphrey v. National Fire Ins. Co., 231 S.W. 751, reviews most of the cases dealing with this identical question. The court followed the rule announced in the case of Weide v. Germania Insurance Co., 1 Dillon, 441, and under the practice in that state held that the failure to submit to an examination or answer material questions should be raised by a plea in abatement, and that a failure to raise the same by such a plea was a waiver of the defense. Under our practice it would be more appropriate to raise this defense by a motion to dismiss, and if the controversy arose over whether certain questions were material, if the court should decide the questions were material, the court should make an order requiring the insured within a certain time to answer such questions, and upon failure to answer said questions the court should dismiss the case, or if during the trial of the case the court should decide that the questions were material, the case should be continued and the insured given an opportunity to answer said questions before dismissing the case.

The courts have been very liberal in construing this provision of the policy and have never placed a technical construction upon the same. See Johnson v. Bankers Mut. Cas. Co. (Minn.) 151 N.W. 413, L. R. A. 1916 F, 1149; Gordon v. St. Paul Fire Marine Ins. Co. (Mich.) 163 N.W. 956, L. R. A. 1918E, 402; Ins. Co. v. Rose, 228 Fed 290, 142 Cow. C. A. 582. To hold a refusal to answer questions which the insured and his attorneys in good faith believed were immaterial would work a forfeiture of the policy, without first giving the insured a right to comply with the same if he was honestly mistaken, would be placing a too narrow and technical construction upon the provisions of the policy. The case should be dismissed only after the court determines the questions in controversy are material, and the insured then refuses to comply with the orders of the court to answer said questions. This court in the former opinion should have ordered the case reversed, with directions to require the insured to answer those questions that were material, and upon his failure to do so then and not until then should the trial court dismiss the case in so far as it related to the insurance upon property covered by the mortgages, but in no event should the case have been dismissed in so far as it relates to the insurance upon the household furniture.

While the general rule is that the question decided by the Supreme Court on the former appeal becomes the law of the case in all its stages, and will not, ordinarily, be reversed on second appeal where the facts are the same, this court, in the case of Oklahoma City Electric, Gas Power Co. v. Baumhoff,21 Okla. 503, 96 P. 758, stated:

"The courts uniformly hold that an appellate court may review and reverse its former decision in the same case where it is satisfied that gross or manifest injustice has been done by its former decision, or where the mischief to be cured far outweighs any injury that may be done in the particular case by overruling a prior decision."

We think this case comes squarely within the above rule, and it was error for this court to order the case dismissed.

We therefore conclude, first, as to the former opinion, the court should have construed the contract as a divisible contract. Second, that after determining certain questions were material, as to certain property covered by the policy, and the defendant should answer said questions, the court should have reversed the case, with instructions to permit the assured to answer said questions. Under the view we take of the case, the same was not prematurely brought, and it was error for this court to so hold.

The opinion rendered July 5, 1921, entitled George v. Connecticut Fire Ins. Co., as published in 200 P. 544, is adhered to with the exception that the third paragraph of the syllabus as it appears therein should be withdrawn and not considered, as the facts stated in the third paragraph of the syllabus are not applicable in view of the conclusion we have reached that the cause of action was not prematurely brought.

For the reasons stated, the second petition for rehearing is denied.

PITCHFORD, V. C. J., and KENNAMER, ELTING, and NICHOLSON, JJ., concur.